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Wage growth 'at virtual standstill'

Real wage growth in the developed world has come to a "virtual standstill" since 2009 and has fallen in some countries, according to a new report.

Wages fell by between 2% and 5% a year in Greece, Portugal, Ireland and Spain, resulting in "real hardship" for low-paid workers, the Organisation for Economic Cooperation and Development (OECD) said.

The Paris-based think tank, which covers 34 countries, added that unemployment would remain well above pre-crisis levels next year in most countries.

Average jobless rates will fall slightly over the next 18 months in the OECD area, from 7.4% this year to 7.1% at the end of 2015, the report said.

"While wage cuts have helped contain job losses and restore competitiveness to countries with large deficits before the crisis, further reductions may be counter-productive and neither create jobs nor boost demand," OECD secretary-general Angel Gurria said.

"Governments around the world, including the major emerging economies, must focus on strengthening economic growth and the most effective way is through structural reforms to enhance competition in product and services markets.

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Long-term unemployment is likely to have peaked but remains a major concern, the report concluded.

Just over 16 million people - more than one in three of the unemployed - had been out of work for 12 months or more in the first quarter of 2014, almost double the number at the start of the economic crisis.

In countries hardest hit, notably in Southern Europe, this had led to a rise in structural unemployment which would not be automatically reversed by a pick-up in economic growth, the OECD warned.

Employment has been increasing in the UK for the past two years, while unemployment has been falling.

Latest figures showed over 30 million people in work in this country, 820,000 more than a year ago, while the jobless total has dipped to just over two million, a rate of 6.4%, the lowest since late 2008.

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TUC general secretary Frances O'Grady commented: "The OECD has now joined the Bank of England in sharing the TUC's concern that falling real wages are bad for both workers and the wider economy.

"With profit levels rising businesses must start paying their staff more. Fairer wages are the only way to ensure that working people get a proper share of the recovery."

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